Chapter 11

Other powers of the court under the Trustee Act

Section 76 – Distribution of shares of missing beneficiaries

(1) New legislation should retain the provision in section 76 of the Trustee Act 1956 under which the court has broad powers to approve distributions by trustees where beneficiaries cannot be traced.(2) The following changes should be made to the requirements concerning advertising for potential beneficiaries:

(a)Trustees should be required to give notice advertising for potential beneficiaries in a manner that is likely to bring the notice to the attention of potential beneficiaries.(b)Trustees may seek advice from the Public Trust and rely on that advice where there is doubt as to what notice advertising for potential beneficiaries is appropriate.(c)Trustees may seek directions from the court, as an alternative to seeking advice from the Public Trust, where the trustee is uncertain about what notice advertising for potential beneficiaries is necessary.

Please give us your views on this proposal.

Current law

11.58Section 76 provides the machinery for ascertaining the existence or whereabouts of unknown or missing claimants. It is a long and impenetrable provision that essentially sets out a process for trustees to follow where beneficiaries cannot be ascertained. Under it the court may give directions where a trustee is uncertain about what advertisements to place to notify potential beneficiaries.

11.59The court also has broad powers under the section to approve distribution where beneficiaries cannot be traced. The process has been used in a few cases involving pension funds that have largely been distributed, but where a handful of outstanding beneficiaries cannot be located despite extensive efforts on the part of trustees. Where the trustees obtain and comply with such directions they are protected against personal liability.

Options for reform

11.60The court needs to retain its broad powers to approve distributions where beneficiaries cannot be traced. However, quite a fundamental rethink of the mechanism for ascertaining the existence or whereabouts of unknown or missing claimants is necessary. Rather than requiring trustees to apply to the High Court for directions about what advertisements the trustee needs to place to notify potential beneficiaries, trustees could be given the option of seeking advice from the Public Trust. The Public Trust could advise trustees on when and how often they should advertise when trying to locate missing beneficiaries. This would not have the status of a court ruling but would at least protect the trustees who act in reliance on it.

11.61More generally the provisions on advertising under section 76 (and also section 35 discussed below) need to be modernised. Advertisements in newspapers are expensive and are also unlikely to be brought to the attention of the beneficiaries or creditors towards whom the advertisement is directed.

11.62The options for reform in respect of advertising are that:

(a)trustees should be required to give notice advertising for potential beneficiaries in a manner that is likely to bring the notice to the attention of potential beneficiaries;(b)trustees may seek advice from the Public Trust where there is doubt as to what notice advertising for potential beneficiaries is appropriate. The provision could allow trustees to rely on the Public Trust’s advice; or(c)trustees could seek directions from the court, as an alternative to seeking advice from the Public Trust, where the trustee was uncertain about what notice advertising for potential beneficiaries was necessary.

11.63Under option (b) the Public Trust would need to be able to charge a fee for its work. It would also need to be free to decline to provide advice where it considered that directions from the court should be obtained.

Discussion

11.64Only a few submitters commented on this section. Most submitters considered the current section to be unnecessarily detailed and long. However, all agreed that there is a need for some means to deal with missing beneficiaries. A few said that trustee corporations have had experience in locating missing beneficiaries. In particular, the Public Trust deals with a number of intestate estates and has processes in place to deal with the identification of widely dispersed families. Submitters suggested that applications to the High Court for directions as to advertising for missing beneficiaries could largely be avoided if trustees and their lawyers were encouraged to seek advice from the Public Trust, other trustee corporations or lawyers with experience in this type of work. We agree that it would be useful to include a mechanism for trustees to seek advice from the Public Trust as an alternative to the court.

11.65Submitters also suggested that the provisions relating to advertising need to be future-proofed so that the new Act continues to be relevant over the next 50 to 60 years. Rather than specifying where and how trustees should advertise, the section should simply require trustees to make such enquiries and give notification (whether in a newspaper or a website or any other way) as the trustee considers necessary to bring the matter to the attention of any potential beneficiary. Provided a trustee has made a conscientious effort to bring the matter to the attention of potential beneficiaries and, where appropriate, has taken proper advice, whether from a trustee corporation or any other similarly experienced person, the trustee should be released from liability if the trustee distributes funds on the basis of the information known.

11.66As already noted in paragraph [11.39], we consulted representatives from the Public Trust. The Public Trust view is that an advisory role in respect of advertising would be a suitable function for the Public Trust.

11.67The court needs to retain its broad powers under section 76 to approve distributions where beneficiaries cannot be traced.